EJ Hired Guns

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Edward Jones taps Greensfelder attorneys

By Heather Cole
St. Louis Business Journal
Updated: 7:00 p.m. ET Jan. 2, 2005

Embattled St. Louis investment firm, Edward Jones, has added a large Washington, D.C. law firm to its arsenal to handle federal regulatory agencies questioning the company's mutual fund investment practices.

advertisementJones hired Wilmer Cutler Pickering Hale and Dorr to represent the firm with the Securities and Exchange Commission (SEC), the National Association of Securities Dealers (NASD) and the New York Stock Exchange (NYSE).
Locally, Jones continues to employ Greensfelder, Hemker & Gale to deal with an investigation by the U.S. attorney's office for the Eastern District of Missouri, multiple class action lawsuits, and a lawsuit filed by the California attorney general's office. Greensfelder has represented Edward Jones in securities arbitration and other matters for years.
Several attorneys at Greensfelder, including white collar crime and regulatory compliance attorneys Jeff Demerath and Richard Greenberg and litigation practice manager David Harris, have been representing Jones in various actions in 2004.
Early this year, the SEC and the NASD began looking into Edward Jones' mutual fund sales practices, including the practice of revenue sharing with select mutual fund families. News stories about the issue spurred the filing of several class action lawsuits.
On Dec. 20, Edward Jones, without admitting or denying wrongdoing, agreed to pay $75 million as part of a settlement agreement with the SEC, the NASD and NYSE, and Managing Partner Doug Hill agreed to pay $3 million of the settlement and step down from leading the firm at the end of 2005.
The settlement with regulators came on the same day that California Attorney General Bill Lockyer filed a securities fraud lawsuit against the firm, alleging it defrauded customers by failing to disclose the revenue sharing arrangements it had with seven mutual funds.
Harris, who has been defending Edward Jones in the class action lawsuits, may be taking on the California case as well. Harris declined to speak about his role representing Edward Jones, citing a request from the brokerage. But according to the Greensfelder Web site, he often represents large brokerage houses in securities class actions and arbitrations.
Nine class action lawsuits were filed against Edward Jones and its executive committee between January and March 2004, according to SEC filings. Five were filed in federal court in St. Louis, with the rest filed in either Los Angeles or New York.
Demerath and Greenberg are no strangers to federal regulatory issues. Demerath, who recently represented former Charter Communications executive David Barford in a federal case involving inflated subscriber numbers, is a former assistant U.S. attorney. Three other former Charter executives were indicted in the case. Charter, as a company, was not charged with wrongdoing.
Greenberg was a trial attorney, then an assistant director, in the civil division of the U.S. Justice Department in the 1980s. Demerath declined to speak about his role representing Edward Jones, also citing a request from the brokerage firm. Greenberg did not return a phone call.
Hill, meanwhile, is represented by Gordon Ankney, an attorney with Thompson Coburn, one of a team of attorneys that represented Charter at the time the four executives were indicted.
Ankney did not return several phone calls seeking comment.
St. Louis lawyers on the plaintiffs' side include Robert Blitz, a partner with St. Louis law firm Blitz, Bardgett & Deutsch. Blitz was one of the attorneys who filed a class action lawsuit on

The Truth's picture
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Jones to bring in the big guns.  But big guns, small guns, or no guns, how do you argue against what they did?  Jones-  "We did nothing wrong?"  Attorney General-  "You admitted you did something wrong and you obviously felt it was more serious than what Morgan Stanley did considering your fine you settled for was $25 million more."
 

joedog's picture
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Interesting. Today the NYSE announces a $13 mil fine to Morgan Stanley and there isn't a blip on the forum.

Joedog

The Truth's picture
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$13 million is pennies to MS.  $75 million is significant to a maw and pop shop like Jones.  End of story.

joedog's picture
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Truth,
After the fine, EJ had almost $3 billion in revenue and over $200 million in income in 2004. Sure its nothing to sneeze at, but its not bank breaking either.    

Also, Banc One got a $400,000 fine for late trading in mutual funds. The regulators should have a "Now Serving" number counter.

Joedog

stanwbrown's picture
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The MS fine was for delivering prospectuses late. How's that compare with kickbacks from mutual fund companies to a brokerage that spent years claiming they were purer than the drtiven snow?

joedog's picture
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stanwbrown wrote: The MS fine was for delivering prospectuses late. How's that compare with kickbacks from mutual fund companies to a brokerage that spent years claiming they were purer than the drtiven snow?

See http://www.sec.gov/news/press/2004-44.htm for the $50 mil fine to Morgan.

I agree EJ was arrogant about it and stupid for the holier than thou claim and if that's what these threads are about so be it.

Joedog

    

xej1984's picture
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joedog wrote:I agree EJ was arrogant about it and stupid for the holier than thou claim and if that's what these threads are about so be it. Joedog  
it be,  it be!!

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"See http://www.sec.gov/news/press/2004-44.htm for the $50 mil fine to Morgan. "
Actually that's MFS's $50M fine. I was talking about MS's $19M they were just hit with (someone above mentioned it). $12M had to do with mailing prospectuses late, the balance was about failure to supervise in two high profile cases.
MS and a number of other firms were fined in 2003 for much the same thing Jones did with a preferred fund list. It's interesting that Jones was fined later, and for far more (against rev) than the others were. I suspect there was an issue there....

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Hey Joedog,
13 mil is the proverbial fart in a windstorm.  Wake up and smell the bacon pal, quit playing both sides of the fence.  We all know you're in the HO.  You and Salesprevention probably share a hot ham 'n' cheese and tater tots in the 'ole HQ cafe, no?

DOUG E FRESH's picture
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BTW Salesprevention is a putz

The Truth's picture
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Salesprevention is a home office clown that is hoping for a $500 bonus from his fearless leaders.  He is hoping after 30 hard years on the job that me might make middle management.  I can see him now running to his moron bosses saying what he read on the board.  Keep up the good work clown!

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stanwbrown wrote:
Actually that's MFS's $50M fine. I was talking about MS's $19M they were just hit with (someone above mentioned it). $12M had to do with mailing prospectuses late, the balance was about failure to supervise in two high profile cases.
MS and a number of other firms were fined in 2003 for much the same thing Jones did with a preferred fund list. It's interesting that Jones was fined later, and for far more (against rev) than the others were. I suspect there was an issue there....

Stan,

I picked the wrong fine, but the below time line reports SEC actions on revenue sharing. Morgan was fined at the end of 2003 for $50 mil.

The Securities and Exchange Commission has taken action four other times on revenue sharing issues:

Dec. 14, 2004: Franklin Resources Inc. is penalized $20 million for using fund assets to compensate brokerage firms for recommending its mutual funds over others.

Sept. 15, 2004: The investment adviser, sub-adviser and principal underwriter and distributor for PIMCO MMS Funds are penalized $11.6 million for failing to disclose facts and conflicts of interest related to fund sales.

March, 31, 2004: Massachusetts Financial Services Co. is penalized $50 million for failing to disclose revenue sharing arrangements with brokerage firms and the conflicts created by them.

Nov. 17, 2003: Morgan Stanley is penalized $50 million for failing to tell customers that a select group of mutual funds paid the firm "substantial fees" for preferred marketing of their funds.

I wonder how many class action lawsuits are pending against Morgan or any of these companies for this. Did the CA AG file against them too? Things that make you go "hmmm?".

Joedog

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Joedog-  the world is out to get Jones, huh?  I know this is hard for you to understand, but Jones is not a well known firm.  They have their name on the dome and every once in a while it gets mentioned.  Heck, it used to be that any Jones advertising would only benefit AG Edwards.  Anyway, $75 is just the tip of the iceberg.  You will see at least another $100 million going out the door after the class action suits.  Remember your firm is going up against "The Bulldog" and this dog has a nasty bite.

joedog's picture
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DOUG E FRESH wrote: Hey Joedog,
13 mil is the proverbial fart in a windstorm. Wake up and smell the bacon pal, quit playing both sides of the fence. We all know you're in the HO. You and Salesprevention probably share a hot ham 'n' cheese and tater tots in the 'ole HQ cafe, no?

I get this is the EJ bashing forum. I don't necessarily disagree with much that is being discussed ( and I use that term loosely). However, its called fair and balanced. Who do you trust when everyone's a crook?   Somebody in all organizations had, has or will have their day.   

Whether I'm HO or not is irrelevant. We're all cogs in the machine making money for someone else (some more than others).

I actually have standing Wednesday lunches with ole' Dougie at the club... Shall I pass along your grretings?

Joedog

ezmoney's picture
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Yea. tell him "he is the best darn scapgoat in the whole wide world"
Dumb cowboy from upstate N.Y. but a rich one.
 

uwec86's picture
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But now he's $3 mil. lighter!!!!!

The Truth's picture
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Maybe Dougie will go back in the field and start churning people like he did before he got the promotion?

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The Truth wrote: Jones to bring in the big guns.  But big guns, small guns, or no guns, how do you argue against what they did?  Jones-  "We did nothing wrong?"  Attorney General-  "You admitted you did something wrong and you obviously felt it was more serious than what Morgan Stanley did considering your fine you settled for was $25 million more."
 

Truth,

Check an American Funds SAI. They share revenue with the top 75 firms that sell their funds. The firms are actually listed in the SAI. (Rememer in '04 40% of every dollar that went into MFs went into American.)

Jones was singled out because they share the revenue sharing with their advisors through bonuses which are based on each branch's profitability.

So truth, what did Jones do that's any worse than what any other firm is doing, besides share the revenue sharing with their advisors?

What does your firm do with the revenue sharing?

BPD

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The grass is GREENER where you water it!

noggin's picture
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Preach the truth brother....

troll's picture
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noggin wrote:Preach the truth brother....
 
true dat....I think this revenue sharing sh*t sucks....just another example of manangement getting into RR's and clients pockets(indirectly...)

The Truth's picture
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The difference is your firm expects and rewards brokers from churning clients out of perfectly good funds to invest in the preferreds.  Plus, just as the US Justice Department said recently, a good percentage of the brokers were never told about the revenue sharing.  They were told these are the best funds and no need doing any research on any of the other funds.  What a joke!  That is about to stop though after hearing the comments from the US Justice Department.  If you work at Jones you know exactly what I mean.  It is routine to see funds like Franklin, Oppenheimer, etc, that get dumped to buy say a Hartford that is twice as expensive just to get revenue sharing.  That is the difference.  Honest people were lied to consistently and it is the honest people that have egg on their faces today.  Maybe you are one of them?

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As a Jones broker I can say that there are many funds on our preferred list that are a joke. Take a look at the Hartford Stock Fund or Hartford Dividend and Growth. We "PREFER" these funds?? Federated is even worse. Oh well...I'm leaving anyways.

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Truth,

You didn't answer the second question. What does your firm and my firm do with the revenue sharing? Mine certaintly isn't sharing it with me.

BPD

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The grass is GREENER where you water it!

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The Truth wrote: The difference is your firm expects and rewards brokers from churning clients out of perfectly good funds to invest in the preferreds.  Plus, just as the US Justice Department said recently, a good percentage of the brokers were never told about the revenue sharing.  They were told these are the best funds and no need doing any research on any of the other funds.  What a joke!  That is about to stop though after hearing the comments from the US Justice Department.  If you work at Jones you know exactly what I mean.  It is routine to see funds like Franklin, Oppenheimer, etc, that get dumped to buy say a Hartford that is twice as expensive just to get revenue sharing.  That is the difference.  Honest people were lied to consistently and it is the honest people that have egg on their faces today.  Maybe you are one of them?

Truth,

I don't work for Jones, but you would think with all this churning you are talking about they would have higher arbitration rates. Take a look (Most recent Weiss ratings):

Prudential Securities, Ameritrade and U.S. Bancorp Piper Jaffray
Have Worst Record of Investor Abuses over Last 5 Years
Fidelity, Credit Suisse, and Edward D. Jones Have the Lowest
Rate of Abuses of Top Firms

PALM BEACH GARDENS, Fla., May 14, 2002 - Of the nation's 18 most prominent retail brokerage firms, Prudential Securities, Ameritrade, and U.S. Bancorp Piper Jaffray recorded the worst record of investor abuses over the five years ending 2001, according to an analysis by Weiss Ratings, Inc., the nation's only provider of brokerage firm ratings. Fidelity Brokerage Services, Credit Suisse First Boston, and Edward D. Jones & Co. had the best record of the top firms, with the lowest rate of abuses per customer account.

Weiss analyzed the 13,232 arbitration cases and regulatory and legal actions recorded by the National Association of Securities Dealers (NASD) against 612 brokerage firms. The review found that 98% of the actions against firms arise from arbitration cases and regulatory violations, while the remaining two percent are composed of criminal actions, civil judicial actions, and other judgments or liens. The number of legal actions filed against the 18 largest retail brokerage firms between 1997 and 2001 were:

Record of Abuses by Top Retail Brokerage Firms 1997-2001

Brokerage Firm Weiss
Safety
Rating Total Arbitration
Cases, Regulatory
& Legal Actions # per mil
Customer
Accounts

Prudential Securities, Inc. B 152 69.5
Ameritrade, Inc. C- 91 67.11
U.S. Bancorp Piper Jaffray, Inc. B 47 64.46
E*Trade Securities, Inc. B+ 118 36.92
Raymond James & Associates, Inc. B+ 36 36.07
First Union Securities, Inc. C 88 35.20
UBS Painewebber Incorporated C+ 87 34.80
A G Edwards, Inc. A- 103 31.21
Salomon Smith Barney, Inc. C 204 30.71
Morgan Stanley Dean Witter & Co. B- 151 27.96
Quick & Reilly, Inc. B+ 34 18.89
Charles Schwab & Co., Inc. B 124 16.53
Merrill Lynch Pierce Fenner & Smith C- 168 16.09
TD Waterhouse Investor Services, Inc B- 68 15.25
American Express Financial Advisors B 19 9.50
Edward D. Jones & Co. LP B+ 38 8.09
Credit Suisse First Boston Corp. C- 20 4.96
Fidelity Brokerage Services LLC B+ 43 3.74

Weiss Safety Rating: A=Excellent; B=Good; C=Fair; D=Weak; E=Very Weak

"This analysis provides a solid, statistical basis for identifying the worst offenders," commented Martin D. Weiss, Ph.D., chairman of Weiss Ratings and author of The Ultimate Safe Money Guide. "But it's still just the tip of the iceberg. The NASD data represent only those actions reported on the firm's public record; it does not include the many investor complaints that are settled before they ever reach the NASD. It's also likely we'll see a flood of new actions in the wake of New York Attorney General Spitzer's recent revelations."

Inability to Pay Arbitration Settlements Triggers Majority of Brokerage Bankruptcies

In a recent review of brokerage firm failures, Weiss found that most were caused by the firms' inability to pay arbitration settlements awarded against them. Rather than pay up, firms often declare bankruptcy and go out of business. The Securities Investor Protection Corporation (SIPC) covers losses due to failure but does not cover unpaid arbitration awards. Weiss advises investors to look seriously at the scope and frequency of legal actions before selecting a brokerage firm.

"Most investors focus too much on finding the broker with the cheapest commissions, but our study brings home the importance of the firm's integrity," added Dr. Weiss. "There are two risks of doing business with abusive firms: the risk of fraud or deceit, and the risk of failure when a firm is slapped with large legal costs and judgments."

Investors can learn about the professional background, business practices and conduct of NASD member firms by visiting the NASD Regulation website at www.nasdr.com. A company-by-company analysis of this information is also provided in Weiss Ratings' Guide to Brokerage Firms, available at many public libraries. As a service to investors, Weiss now includes statistics on arbitration cases and regulatory and legal actions taken against all of the institutional, full-service, discount, and online brokerage firms that it rates.

Notable Upgrades and Downgrades

Based on its latest quarterly review of 612 brokerage firms, Weiss Ratings issued 24 upgrades and 41 downgrades. Notable upgrades include:

Franklin/Templeton Distributors Inc. San Mateo, Calif. from B- to B
Raymond James & Associates Inc. St. Petersburg, Fla. from B to B+
Scottrade Inc. St. Louis, Mo. from B to B+

    Notable downgrades include:

Ameritrade Inc. Bellevue, Neb. from C+ to C-
First Union Securities Inc. Charlotte, N.C. from B- to C
Merrill Lynch Pierce Fenner & Smith New York, N.Y. from from C+ to C-

The Weiss ratings are based on an analysis of a brokerage firm's capitalization, leverage, earnings, liquidity and stability. The latter category combines a series of factors including size and growth, strength of affiliate companies and risk diversification. In addition to evaluating a company's financial stability, Weiss collects information on each firm's commission rates, services offered, and branch locations.

Weiss issues safety ratings on more than 15,000 financial institutions, including securities brokers, banks, insurers, and HMOs. Weiss also rates the risk-adjusted performance of more than 11,000 mutual funds and more than 9,000 stocks. Weiss Ratings is the only major rating agency that receives no compensation from the companies it rates. Revenues are derived strictly from sales of its products to consumers, businesses and libraries.

My firm was right in the middle.

BPD

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The grass is GREENER where you water it!

Jonestown's picture
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The St. Louis paper mentioned "message boards" and I think someone told the GP's,.......they've arrived.  Hey Jimmy!
 
 
 
 
 
 
 

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1997-2001.  Let's see you picked an interesting time frame to review complaints.  And concerning the mutual fund churning, how would your unsophisticated clients understand what is happening to them when most of your brokers do not know the fraud you have going there at Jones.  My firm does not share revenue sharing with the brokers and we certainly do not sell 7 funds exclusively and would never would have a dog like Federated on our list.
I have a couple of questions for you Mr. GP.  With those stand alone offices you have in those remote towns, how many clients do you think:  a) know the importance of complaints and how they are handled  and b) how many complaints actually get pitched at these stand alone offices.  If you believe in the truth you will understand what I am saying.

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How much damage would be done if GP's (or any IR) were found out that they were posting on this site but misrepresenting themselves to say they do not work for their firm?

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Truth,

Have you seen more recent Weiss ratings than 1997 - 2001? So are saying Jones wasn't churning during this period, but afterward?

So just because I'm posting actual statistics and not hear say, I'm a Jone's GP. I thought you could come back with something better than that.

And if Edward Jones clients are so unsofisticated, then why are you so jealous of Edward Jones that you need to spend so much time bashing them.

So your answer to what your firm does with revenue sharing is that they don't share it with you. So in other words it goes into the pockets of the exectives at your firm. Interesting.

BPD

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The grass is still GREENER where you water it!

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I bet I can point to the fact that we did not generate $100 million in revenue sharing.  I bash Jones for just a couple of reasons.  The #1 reason is the behavior of the GPs.  The whole complaint argument is pretty sad on your part.  We all know that the internet craze and the market downturn had a lot to do with the complaints.  We also know that sophisticated clients understand the ramifications of complaints.  So I don't understand why you can't understand what I am stating.  Jones does prey on unsophisticated clients and since they don't push stocks, they were lucky with the bubble bursting on them.  Now Bachman will tell you good ol boys that he purposely stayed away from online trading and such.  But we know the truth is he knew his technology system #1 could not accomodate it,  #2 the mode of supervision would cause the regulators to scream and #3 the lack of overall financial intelligence with the brokers is pretty low.
Jones got lucky.  But come back to me now since Jones is actually making the headlines.  Or how about I come back to you in a few months.  Complaints are 1 thing and class action suits are another. After "The Bulldog" has his fun the headlines will be busy.

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And yes, Jones was churning mutual funds during this time frame.  It is just too sad that Maws and Paws of the world cannot look at a Morningstar to see that their Franklin, Oppenheimer, etc. funds that were dumped and reinvested into the junk at Jones far outperformed whatever mark you told them.  But I almost forget, you guys sell American Funds.  Isn't that the company moto now?

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The whole complaint argument is pretty sad on your part.  We all know that the internet craze and the market downturn had a lot to do with the complaints. 

Truth,

From what I've heard Jones is a buy and hold shop. I doubt their clients were out of the market during the down turn.

So are you saying Jones had fewer complaints / arbitartions during this time frame because they were not as effected by the "internet craze and the market downturn" as other firms? And if this is the case it is because "They got lucky."

I used to beleive in you Truth, but this is a little far fetched. Maybe it's time to change your screen name again?

BPD

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The grass is still GREENER where you water it!

Guest1's picture
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Truth, I gotta admit... Jimmy's got you so far. Your argument above is rather lame for you. You are generaly sharper than that. Time to regroup?

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Not time to regroup because the facts still stand out.  Break down what dominates the complaint arena.  Margin and stock losses stand out.  The fact that Jones does not rank high in the number of complaints has more to do with what they push than how strong their "ethics" are.  I was just trying to add some more beef as to why complaints may be low.  The bottom line is Jones is a mutual fund/annuity chop shop and nothing a GP or BPD or anyone else can defend.  You will hear we hold our average funds longer than any other company.  Well, that is great and let's also add that you are talking about funds that are originally purchased at Jones.  What the real truth will show is that the inexperience of the Jones reps and the push on preferred funds lead the brokers to churn out of good fund companies that transfer in and then repositioned into crap funds at Jones.  No broker at that firm can dispute this.

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Truth,

Oh mighty one, what is your product mix?

JonesGP's picture
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We did nothing wrong, and we have plenty of funds to ride out this minor inconvenience. We can hire plenty of people who don't ask any questions and do as well tell them to do. We know best. Just do as we tell you to do, it will all be fine.

The Truth's picture
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You are pretty funny JonesGP, the problem is your are right about a few things.

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Jones GP I cannot believe that you would defend an organization that sponsored the Van Pearcy/ Hartford funds roadshow. How much money did all those investors loose when their EDJ rep took them out of American Funds and put them Hartford for more revenue sharing money. I know of alot of now GP's who did just that, and yes they were rewarded not condemned. You speak as if everything will be fine now. But according to the numbers on this discussion board there are 16000 people out there who were once EDJ brokers alot of them are bitter from the experience and willing to talk to authorities regarding EDJ salespractices. I believe it is far from over for Edward Jones.

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Good point Former.  I know of one GP that moved all of his assets within about a 6 month timeframe into Hartford Funds.  And he was not shy about explaining why.  Where was compliance at I asked?  They were pretty much told to turn their heads from what I hear. 
It is amazing to read from the Jones people here about how optimistic they are about the California case and the other class action suits.  Little do they now there are so many other shady practices that only the vets on this board know about.
 

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The Truth wrote: Not time to regroup because the facts still stand out.  Break down what dominates the complaint arena.  Margin and stock losses stand out.  The fact that Jones does not rank high in the number of complaints has more to do with what they push than how strong their "ethics" are.  I was just trying to add some more beef as to why complaints may be low.  The bottom line is Jones is a mutual fund/annuity chop shop and nothing a GP or BPD or anyone else can defend.  You will hear we hold our average funds longer than any other company.  Well, that is great and let's also add that you are talking about funds that are originally purchased at Jones.  What the real truth will show is that the inexperience of the Jones reps and the push on preferred funds lead the brokers to churn out of good fund companies that transfer in and then repositioned into crap funds at Jones.  No broker at that firm can dispute this.

Truth,

RE: Mutual Fund / Annuity chop shop comment.

Oh mighty one.

A couple questions for you:

1.What is your product mix?

2.Why did Jones come out with an A share annuity?
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1)  moving towards 40% in fee based business with closed end and exchange traded funds making up the next portion.  I probably have 10 annuities on my book and none inside IRAs.  I don't have muni bonds inside the IRAs either.  A Jones guy would get a laugh out of that one. 
2)  from what I hear there was pressure from compliance and ultimately there was a meeting of the minds with the sales side still winning out.  You have brokers out there and if you are an insider you know who I am talking about that sell a good percentage 40% of annuities inside of IRAs.  The A share is a smoke screen to present to the regulators.  It is an attempt to say we do not sell annuities for the commission because we offer A shares.  We just feel that annuities are the right choice of investment for the client.  But I assume they leave out the revenue sharing element there too.
Next question??

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Truth, how do you feel about Annuities that offer a dollar for dollar withdrawal with a GMIB rider at 6% in an IRA for a client who is currently withdrawing income?

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formeredjbroker wrote:Jones GP I cannot believe that you would defend an organization that sponsored the Van Pearcy/ Hartford funds roadshow. How much money did all those investors loose when their EDJ rep took them out of American Funds and put them Hartford for more revenue sharing money. I know of alot of now GP's who did just that, and yes they were rewarded not condemned. You speak as if everything will be fine now. But according to the numbers on this discussion board there are 16000 people out there who were once EDJ brokers alot of them are bitter from the experience and willing to talk to authorities regarding EDJ salespractices. I believe it is far from over for Edward Jones.

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formeredjbroker wrote:Jones GP I cannot believe that you would defend an organization that sponsored the Van Pearcy/ Hartford funds roadshow. How much money did all those investors loose when their EDJ rep took them out of American Funds and put them Hartford for more revenue sharing money. I know of alot of now GP's who did just that, and yes they were rewarded not condemned. You speak as if everything will be fine now. But according to the numbers on this discussion board there are 16000 people out there who were once EDJ brokers alot of them are bitter from the experience and willing to talk to authorities regarding EDJ salespractices. I believe it is far from over for Edward Jones.
What about the public who relied on the salespractices of EDJ reps?  They were steered into funds in which some of the fund families got into legal trouble ie Putnum.  Looks likely a major class action suit is brewing that will have legs!

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BYSTANDER-  I don't believe in annuities inside of IRAs period.  The vehicle is too expensive and the riders are only an enticement to push the product.  How long is the average variable annuity held?  Once you answer that question you will realize why these riders seem appealing.  The hold time is somewhere short of 6 years before some other salesman such as a Jones broker comes in and gets the client to 1035 it away.  Bottom line is the annuity companies charge for these riders and never expect to have to pay on them.  Does this answer your question?

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Truth, I'm sorry but it did not answer my question, I asked you about a 6% GMIB rider that is dollar for dollar in which the client is currently taking withdrawals, you do understand how this works, correct?

The Truth's picture
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Joined: 2004-12-01

I do but I was talking about riders on annuities in general.  In your example you are discussing 1 potential where you can make a case only because the 6% cannot be obtained in other secure investments as a supplement to withdrawals.  But I still will not sell these products because:  1) the clients very rarely understand how they work, let alone some reps  2)  the bullseye will be squarely on those that push variable annuities.
Those that live and die by annuities will look to the past 3 years in the market as a reason to push them.  I tend to look at a much longer horizon with also the understanding that the fees can and do eat away at the gains.
 

Bystander's picture
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Joined: 2005-01-16

Truth, you still haven't demonstrated that you know how the rider works in conjunction with current withdrawals...

stanwbrown's picture
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Joined: 2004-12-01

He's amswered your question. Simply put, the 6% GMIB is a gimmick. If you're client's rational and you have a clue about managing an income focused portfolio you can do better and the client will pay less.

Bystander's picture
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Joined: 2005-01-16

Stan, what would be your counter proposal?

The Truth's picture
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Joined: 2004-12-01

I didn't know I was taking a test Mr. Bystander.  The rider speaks for itself.  I don't know how to dumb it down.  How do you counter the tax situation on annuities when you take money out?

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